Numerous empirical studies conducted over the last two decades have attempted to create predictive models that could help to foresee future economic recessions by making use of different macroeconomic variables that theoretically influence economic growth. In this study, we test the predictive capacities of different macroeconomic variables to assess their potential usefulness as indicators that could be used for monetary policy and predicting economic downturns ahead of time. Moreover, the study includes reviews of academic literature which suggest these relationships, and allows room for further academic research and analysis.
The studies suggest that a deeper study can be made into the subject using a probit regression model. This model would allow us to anticipate with some degree of certainty an oncoming fiscal recession. The models are subsequently run, and find that future expectations and liquidity measures in particular could be useful as conceptual variables that could be used to forecast economic downturns.
Fatehpuria, Aniruddh, "The Economic Oracle: Do certain Macroeconomic Indicators possess predictive content for Future Real GDP and Economic Recessions?" (2017). Senior Independent Study Theses. Paper 7578.
Finance | Macroeconomics | Political Economy
Bachelor of Arts
Senior Independent Study Thesis
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